Deck 7: Hedge Funds As Activist Investors

Question 1

Which of the following is true?

A) Hedge funds tend to facilitate more M&As
B) Hedge funds tend to have a dampening effect on M&As
C) Hedge funds are neutral as it relates to M&A activity
D) None of the above True or False Questions

Answer 1

A

Question 2

Which of the following is not an example of an activist hedge funds?

A) Carl Icahn Enterprises
B) Relational Investors
C) Goldman Sachs
D) Jana

Answer 2

C

Question 3

Research, such as the work of Greenwood and Schoar, found that financial performance of companies improve after activists establish stock positions in the firms.

Answer 3

True

Question 4

Research, such as the work of Clifford, has established that when activists establish share position in target shareholder wealth declines.

Question 5

Which of the following is a potent defense against activist hedge funds?

A) Poison pills
B) Staggered boards
C) Improved financial performance
D) All the above
E) None of the above

Question 6

There is research which supports the view that investments in activist funds tend to outperform nonactivist hedge fund investments.

Question 7

Activists acquire stock positions with intent to make changes in the company which will increase the stock price and give them a profit.

Question 8

Which of the following may be a valid criticism of activist hedge funds?

A) May cause target firms to be too short-term oriented
B) Tend to reduce target financial performance
C) Often fail to yield positive returns for investors
D) All the above
E) None of the above

Question 9

Answer: Research, such as the work of Huang, found that companies which had activists in their shareholder base tended to receive higher takeover premiums when they are sold.

Question 10

Which of the following are examples of factors that facilitated the growth of activist hedge funds over the years 2012-2018?

A) Rising stock market
B) High cash balances of U.S. companies
C) Growth of the U.S. economy
D) All the above